The Russell 2000® Index (RUT) Weeklys options are listed to provide expiration opportunities every week. Weeklys are typically listed on Thursdays and expire on Fridays, provided that such expirations were not previously listed (i.e. Weeklys are not listed if they would expire on a 3rd Friday or if a Quarterly option would expire on the same day).
Trading Activity RUT “Weeklys”
The daily and monthly trading activity in the RUT “Weeklys” average approximately 30% of the total RUT volume.
As a small-cap index, options on the Russell 2000 Index have often carried a higher skew and volatility compared to options on the S&P 500 Index (SPX), the most actively traded large-cap index options. This creates interesting opportunities for option writing and spread strategies particularly in short dated options.
- Market participants trading in RUT Weeklys expressed a preference for changing the RUT Weeklys to a PM-settled contract including:PM-settlement for RUT Weeklys puts the options in-line with most other Weeklys, thus facilitating spread trading opportunities.
- PM-settlement puts the Weeklys in-line with Quarterly options on RUT.
- PM-settlement allows an extra day of trading and lowers Thursday to Friday overnight risk.
New PM-settled Expirations in RUT
There will be three changes made to the series of Russell 2000 Index options made in January 2016.
The RUT Quarterlys options symbol will be changed from RUTQ to RUTW. RUT Quarterlys cease trading and PM-settle on their last trading day at 3:00 P.M. (Central). Open GTC orders in RUTQ will be cancelled by the Exchange after the close of business on 1/4/2016. Effective 1/5/2016 RUT End-of-Quarter expirations will be traded under symbol RUTW.
On January 21, CBOE & C2 will introduce the new RUT End-of-Week option series RUTW that will cease trading at 3:00 p.m. (Central) and PM-settle on their last trading day. AM-settled Weekly RUT options series will cease trading on 1/21 and expire at 8:30 a.m. on 1/22/16.
Upon completion, the new PM-settled RUTW option series will include End-of-Week, End-of-Month, and End-of-Quarter expirations and will PM-settle at 3:00 p.m. on their last trading day.
Alternatively, the AM-settled RUT options series that expire on the third Friday of the month will continue to trade under the RUT symbol and will not be impacted by the changes.
The Hybrid trading platform will support both PM-settled RUTW and AM-settled RUT option series with access to open outcry processing, electronic processing, including the Complex Order Auction (COA), the Complex Order Book (COB) and Automated Improvement Mechanism (AIM). Eligible orders for any combination of RUT and/or RUTW option series including those with End-of-Week, End-of-Month, End-of-Quarter, and/or standard third-Friday expirations will be supported.
RUTW PM-settled Expirations
- 1/5/16 – List Initial End-of-Quarters (Mar. 31, Jun. 30, Sept. 30, and Dec. 30, 2016
- 1/21/2016 – List Initial End-of-Weeks (Feb. 5, 12, 26, and Mar. 4, 2016)
- 1/21/2016 – List Initial End-of-Months (Jan. 29, Feb. 29, Apr. 29, and May 31, 2016)
The settlement symbol RUT will be used for the PM-settled RUTW option series and its settlement value posted on the CBOE website http://www.cboe.com/Data/WeeklysSettlements.aspx.
The settlement symbol RLS will continue to be used for AM-settled RUT options series that expire on the third Friday of the month and its settlement value posted on the CBOE website. http://www.cboe.com/data/settlement.aspx
Features of RUT Weeklys Options Include
- CBOE’s Hybrid Trading System – Market participants can choose to route orders to C2 or CBOE for an automated or an open-outcry market.
- PM-settlement – Aligns with most other ETF & Index Weeklys options, facilitating spread trading. Market participants will have the ability to trade in and out of positions on settlement day.
- Large Contract Size with a $100 Multiplier – If the Russell 2000 Index is at 1,200, RUT Weeklys options will have a notional size of $120,000 (~10 x larger than IWM options).
- Cash-Settlement, European-Style Exercise –
- No risk of early assignment or loss of dividends unlike IWM and other ETF options.
- CBOE Circulars (RG 07-126 and RG 12-127) allow RUT options to be written on a “covered” basis against IWM or VTWO ETF shares in a margin account, provided the investor’s brokerage firm has such policies in place.
- Tax Treatment – Under section 1256 of the Tax Code, profit and loss on transactions in certain exchange-traded options, including RUT & RUTW, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the Tax Code.”
*Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations are subject to changes and varying interpretations
To learn more about options on the Russell 2000 Index and Weeklys please visit: